Traditional Accounting vs Cloud Accounting
Do you know about the many benefits of cloud accounting? We have compiled a simple explanation comparing cloud accounting measures with traditional methods so you might be able to decide whether, or not, cloud accounting is for you.
Firstly, what is cloud accounting?
We want to make sure you understand the difference between ‘in the cloud’ and ‘online’.
In order to make an online purchase you are likely to be connecting to a server/servers controlled by the company from whom you are making a purchase from (a server is a computer that stores information and/or provides services to other computers).
When software and data is being stored in ‘the cloud’ it will exist on multiple servers in many locations. This means that the data and software is stored using this method will be less likely to be lost or destroyed. For example, if your data is secured across multiple locations this means it will be less vulnerable to software or hardware malfunctions, power outages, physical damage, theft or loss.
In conclusion, cloud accounting is when accounting software is hosted on multiple servers in multiple locations compared to existing only on your own.
How does it compare to traditional accounting?
Comparing the cost
Traditional accounting: Usually you must own the expensive hardware required to run the accounting software. This hardware will need to be insured and installed by a professional with the appropriate IT expertise and will likely need to be regularly replaced as the demand you will place on the software will be continually increasing. Furthermore, as newer versions are published, older versions will no longer be ‘supported’ (meaning the publisher will cease to take responsibility for the systems failures). As your firm grows you will need to purchase more software licences to cover the increasing number of users.
Cloud accounting: Since all data and accounting software are held in multiple locations in the cloud, you do not require to purchase, insure, update and manage this specialised hardware. Whilst some cloud accounting packages are free there are others that require you to pay a monthly subscription fee.
In return for this fee you will automatically receive the latest updated versions of the software and multiple users should be able to access the software for no added cost.
Additionally, the software provider will offer support so you will not have the additional cost of paying an IT professional to update or install software.
Accessibility
Traditional accounting: You are only able to access the data and software when you are on a device which has had the software installed.
Cloud accounting: Multiple people in different locations are able to access the software and the data that it holds, as long as they have internet access and a secure login, therefore making it possible for financial admin to be accessed from anywhere at any time.
We believe that cloud accounting is the better choice. It is more secure, less expensive, more convenient and easier to maintain.
Collaborative working and availability of real-time data
Traditional accounting: Data must be updated on every device using the software, so updated files need to be transferred from one device to another by email or memory stick, or downloaded from your own internal server.
Only one person is able to access real-time data at any one time. This means that group projects or discussions which require access to real-time data are not possible.
Cloud accounting: Every data alteration is universal and any individual in your company who has access to the software can access the real-time data instantly.
With cloud accounting there is no need to transfer files manually. Multiple people can view and discuss data simultaneously, making collaboration effortless.
Environmental friendliness
Traditional accounting: You need to own your own hardware, which will need replacing eventually. In order to simultaneously show everyone in a meeting data you would need to print it out or display the relevant data via a projector. Both these methods of allowing access to the data require using power. Furthermore, all attendees will most likely need to travel to all be present at the same location for the meeting.
Cloud accounting: All the individuals who are required to view data during a meeting are able to do so from their own internet—enabled devices from wherever they are. Then they can make use of an appropriate communications app so they can join the meeting without travelling to the conference in person, reducing travel and therefore carbon emission.
The cloud has huge storage capabilities and has the potential to reduce, and possibly totally eliminate, the need for printing.
Safety and security
Traditional accounting: All your data could be lost if the devices on which it is stored become stolen, lost, damaged (via fire or flooding) or malfunction.

The data could potentially be hacked by someone who has access to or steals a device. Your data will only be as secure as your last security update. Transferring files by memory stick or email also raises concerns.
Cloud accounting: Even if your entire office was to be destroyed or the devices of every member of staff were stolen, you would still have access to all of your data which is held securely in the cloud, on multiple servers in multiple locations.
Once you have internet connection you would have complete control of your data again. If someone was to steal a device they would still not be able to gain access to your data since nothing is being stored on that device itself.
The software provider you purchased your software from is completely responsible for the security of your software. It is in their best interest to keep clients’ data secure and they are extremely skilled and successful at doing so.
It is obvious that cloud accounting is cheaper, more secure and a much more convenient, more accessible system than traditional accounting methods. If you are still using traditional methods then why not give cloud accounting a try?
XERO is a simple cloud accounting software package with essential features which offers both free and low-cost premium options. We highly recommend you take a look at this software today and discover the most convenient, modern accounting system available.
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